National Specialty Insurance Co. v. Marquis Yachts, LLC

Filing 34

ORDER denying 26 MOTION to Strike 20 Paragraphs 14-34 of Plaintiff's Second Amended Complaint and Incorporated Memorandum of Law. Signed by Judge Beth Bloom on 10/4/2021. See attached document for full details. (scn)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 21-cv-22066-BLOOM/Otazo-Reyes
NATIONAL SPECIALTY INSURANCE
CO., a foreign corporation, as subrogee of
Christian Stenharg d/b/a/ South Beach
Charters,
Plaintiff,
v.
MARQUIS YACHTS, LLC,
Defendant.
______________________________________/
ORDER ON MOTION TO STRIKE
THIS CAUSE is before the Court upon Defendant Marquis Yachts, LLC’s (“Defendant”)
Motion to Strike Paragraphs 14-34 of Plaintiff’s Second Amended Complaint, ECF No. [26]
(“Motion”), filed on August 11, 2021. Plaintiff National Specialty Insurance Co. (“Plaintiff”) filed
a Response in Opposition to the Motion, ECF No. [30] (“Response”), to which Defendant filed a
Reply, ECF No. [31] (“Reply”). The Court has carefully reviewed the Motion, the record in this
case, the applicable law, and is otherwise fully advised. For the reasons set forth below, the Motion
is denied.
I.

BACKGROUND
On June 3, 2021, Plaintiff initiated this subrogation action against Defendant arising from

a fire on a 2016 model 55’ VanDutch Motor Yacht (“Subject Vessel”) manufactured by Marquis.
See generally ECF No. [1]. According to the Second Amended Complaint, ECF No. [20]
(“Complaint”), on March 31, 2016, Christian Stenharg (“Insured”) purchased three VanDutch
yachts from Marquis for a total amount of $1,500,000.00—a price below retail. Id. ¶¶ 35-36. There

Case No. 21-cv-22066-BLOOM/Otazo-Reyes
was no written purchase agreement between Marquis and the Insured, nor were any express
warranties provided. Id. ¶¶ 37-38.
On June 24, 2019, a fire occurred aboard the Subject Vessel while it was moored at a
marina located at 300 Alton Road, Miami Beach, Florida. Id. ¶ 40. The fire was determined by
investigators to be the result of a manufacturing defect in the electrical system of the Subject
Vessel, which purportedly “existed at the time Marquis placed the Subject Vessel into the stream
of commerce when it was sold to the Insured.” Id. ¶¶ 44-50. As such, the Complaint asserts a single
claim against Marquis for breach of the implied warranty of merchantability—i.e., that the Subject
Vessel “would have an electrical system which was fit and capable of powering the Subject
Vessel’s necessary systems without causing a fire.” Id. ¶ 64; see also id. ¶¶ 59-68.
In the Motion, Defendant seeks to strike the paragraphs 14-34 of the Complaint, which
provide factual allegations regarding the contractual relationship between Marquis and VanDutch
Marine Ltd. (“VanDutch”) to manufacture VanDutch model yachts, the lawsuit that ultimately
ensued between Marquis and VanDutch, and the circumstances under which the Insured purchased
the Subject Yacht. The allegations are as follows:
History of Marquis and VanDutch Yachts
14. Marquis was previously owned by Genmar Holdings, which filed for
bankruptcy in 2009.
15. In 2010, the Pulaski, Wisconsin manufacturing facility (previously owned by
Genmar Holdings) and the Marquis brand were purchased by the investment firm,
J&D Acquisitions.
16. In 2013, Marquis and VanDutch Marine Ltd. (“VanDutch”) entered in a
contract entitled “Purchase Agreement for Construction of 120 VanDutch Yachts”
(“the VanDutch Contract”), with an effective date of November 19, 2013.
17. Under the “VanDutch Contract” Marquis agreed to manufacture 120 VanDutch
yachts from the inception of the Contract through December 30, 2014.
18. The 120 yachts consisted of all five VanDutch models- the 30’, 40’, 40’ WalkAround, 55’ and the new 45’ and 70’.
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Case No. 21-cv-22066-BLOOM/Otazo-Reyes
19. The manufacture of all VanDutch-brand yachts were to occur in Marquis’
Pulaski, Wisconsin manufacturing facility.
20. In order to meet the production demands and timely perform its obligations
under the VanDutch Contract, Marquis had to expand its workforce, dedicate a
portion of its manufacturing facilities exclusively to the manufacture of the
VanDutch yachts, make capital improvements, and borrowed money to fund
necessary expenses.
21. Ultimately, production under the VanDutch Contract was reduced from the
original 120 to 82, then down to 48, and then down to 36 as result of (a) delays in
VanDutch supplying necessary production molds (b) delivering equipment that was
un-useable without significant refurbishing and rehabilitation and (c) failure by
VanDutch to make periodic down payments on invoices.
22. As early as 2015, production bottomed out at a total of only 17 yachts.
Marquis Lawsuits Against VanDutch
23. On April 22, 2015, Marquis commenced suit against VanDutch in the U.S.
District Court for the Eastern District of Wisconsin, alleging breach of the
VanDutch Contract.
24. As a result, the parties entered into negotiations that resulted in a Settlement
Agreement and a new Manufacturing Agreement effective on May 4, 2015 (“the
2015 VanDutch Contract”).
25. The 2015 VanDutch Contract required VanDutch to pay down payment
invoices on each model yacht that Marquis agreed to manufacture for VanDutch;
and provided for liquidated damages in the event of nonpayment or lay payments.
26. In February of 2016, Marquis commended a second lawsuit against VanDutch
in the District Court of Minnesota, alleging that during late 2015 and into 2016,
VanDutch failed to make numerous invoice and final payments pursuant to the
terms of the 2015 VanDutch Contract, causing over $3.8 million in damage to
Marquis.
27. As a result, of VanDutch’s various contract breaches, Marquis was forced to
lay off employees specifically hired to build VanDutch-brand yachts.
28. Marquis suffered significant financial losses on each VanDutch yacht it
constructed under the contracts with VanDutch.
29. The Subject Vessel was one that was manufactured by Marquis under the 2015
VanDutch Contract, at a significant loss to Marquis and during a period when the
commercial relationship between VanDutch and Marquis had significantly soured.

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Case No. 21-cv-22066-BLOOM/Otazo-Reyes
30. In fact, the Subject Vessel was manufactured during the time the second lawsuit
against VanDutch was pending, but not yet settled.
Stenharg’s Purchase of the Yacht
31. In approximately March of 2016, the Insured became interested in purchasing
VanDutch model yachts for purposes of a charter business in Florida.
32. He was unaware of Marquis’ difficulties in manufacturing the VanDutch-brand
yachts and its soured commercial relationship with VanDutch.
33. The Insured was also not made aware that Marquis had in fact commenced
litigation twice against VanDutch; and that one lawsuit was ongoing at the time
Marquis manufactured the Subject Vessel ultimately purchased by the Insured.
34. In fact, at the time of the sale to the Insured, Marquis was engaged in a “fire
sale”- haphazardly selling its VanDutch-branded yacht stock at extremely
discounted prices directly and not via dealers, and without written purchase
contracts or written warranties- in order to recoup minimal costs to manufacture
same.
Id. ¶¶ 14-34.
II.

LEGAL STANDARD
Rule 12(f) of the Federal Rules of Civil Procedure permits a court to “strike from a pleading

an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter,” granting
courts broad discretion in making this determination. Fed. R. Civ. P. 12(f); see also Morrison v.
Exec. Aircraft Refinishing, Inc., 434 F. Supp. 2d 1314, 1318-19 (S.D. Fla. 2005); Williams v.
Eckerd Family Youth Alt., 908 F. Supp. 908, 910 (M.D. Fla. 1995). Under Rule 12(f), “[a] motion
to strike will usually be denied unless the allegations have no possible relation to the controversy
and may cause prejudice to one of the parties.” Harty v. SRA/Palm Trails Plaza, LLC, 755 F. Supp.
2d 1215, 1218 (S.D. Fla. 2010) (internal quotation and citation omitted); see also BB In Tech. Co.
v. JAF, LLC, 242 F.R.D. 632, 641 (S.D. Fla. 2007) (same); Home Mgmt. Solutions, Inc. v.
Prescient, Inc., 07-20608-CIV, 2007 WL 2412834, at *1 (S.D. Fla. Aug. 21, 2007) (same); Action
Nissan, Inc. v. Hyundai Motor Am., 617 F. Supp. 2d 1177, 1187 (M.D. Fla. 2008) (same). Courts
have broad discretion in considering a motion to strike under Federal Rule of Civil Procedure
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12(f). See, e.g., Sakolsky v. Rubin Mem’l Chapel, LLC, 07-80354-CIV, 2007 WL 3197530, at *2
(S.D. Fla. Oct. 26, 2007). Irrespective of the Court’s broad discretion, this ability to strike is
considered to be drastic, and is often disfavored. Thompson v. Kindred Nursing Ctrs. E., LLC, 211
F. Supp. 2d 1345, 1348 (M.D. Fla. 2002) (quoting Augustus v. Bd. of Pub. Instruction of Escambia
Cnty., Fla., 306 F.2d 862, 868 (5th Cir. 1962)); Fabing v. Lakeland Reg’l Med. Ctr., Inc., 8:12CV-2624-T-33MAP2013 WL 593842, at *2 n.2 (M.D. Fla. February 15, 2013) (calling Rule 12(f)
a “draconian sanction”).
III.

DISCUSSION
In the Motion, Defendant argues that the allegations set forth in paragraphs 14-34 of the

Complaint are immaterial and scandalous because they do not either directly or circumstantially
prove the existence of manufacturing defect or how any defect caused the fire on the Subject
Vessel. Defendant maintains that “these allegations are an undisguised attempt to prejudice
Marquis by diverting the attention of the Court and jury to arguments and issues wholly unrelated
to the claims at issue in this case.” ECF No. [26] at 3. Plaintiff responds that the allegations “relate
to the manner in which parts were secured for the subject yacht, the quality of the parts, and the
financial constraints under which the yacht was manufactured, which may have led to shortcuts
both in materials and workmanship.” ECF No. [30] at 4. Plaintiff further contends that these
allegations are not scandalous and present pertinent background information necessary to fully
understand the condition in which the Subject Vessel was constructed and sold to the Insured. Id.
at 6.
Upon review, the Court determines that the allegations in paragraphs 14-34 of the
Complaint should not be stricken. First, Defendant has not met its heavy burden of demonstrating
that the challenged allegations “have no possible bearing upon the subject matter of the ligation.”
Cormack v. N. Broward Hosp. Dist., No. 08-61367-CIV, 2009 WL 247848, at *1 (S.D. Fla. Feb.

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2, 2009) (citing Craig Funeral Home, Inc. v. State Farm Mut. Auto. Ins. Co., 254 F.2d 569, 572
(5th Cir. 1958)). Rather, it is apparent that these allegations are probative of Plaintiff’s breach of
implied warranty of merchantability claim and provide background information relevant to
establish a causal link between the circumstances surrounding the manufacturing process and the
purported defect that led to the fire on the Subject Vessel. At this juncture, the Court finds no basis
to strike the allegations as immaterial. Whether the facts, if any, supporting these allegations are
admissible presents an evidentiary question that may be challenged at a later stage of the
proceedings.
Additionally, the Court is not persuaded that the challenged allegations are scandalous.
“The word ‘scandalous’ generally refers to any allegation that unnecessarily reflects on the moral
character of an individual, states anything in repulsive language that detracts from the dignity of
the court, or casts a cruelly derogatory light on a party or other person.” Badilo v. City of Deerfield
Beach, No. 13-60057-CIV, 2013 WL 3762338, at *1 (S.D. Fla. July 16, 2013) (citing S.E.C. v.
Lauer, No. 03-80612-CIV, 2007 WL 1393917, at *2 (S.D. Fla. Apr. 30, 2007)). Here, paragraphs
14-34 do not allege any facts that either disparage or defame Defendant, or which charge
Defendant with reprehensible conduct. Indeed, many of these allegations derive from Marquis’
court filings against VanDuch, ECF No. [30-1], and explain how the Subject Vessel was
constructed and the condition in which it was sold to the Insured. While the challenged allegations
may reflect poorly on Defendant, the Court cannot conclude that they do so “unnecessarily” or that
they cast “a cruelly derogatory light” on Defendant. Badilo, 2013 WL 3762338, at *1.
IV.

CONCLUSION
Accordingly, consistent with this Order, Defendant’s Motion to Strike Paragraphs 14-34

of Plaintiff’s Second Amended Complaint, ECF No. [26], is DENIED.

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Case No. 21-cv-22066-BLOOM/Otazo-Reyes
DONE AND ORDERED in Chambers at Miami, Florida, on October 4, 2021.

_________________________________
BETH BLOOM
UNITED STATES DISTRICT JUDGE
Copies to:
Counsel of Record

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